The Textbook Business Explained: Supply and Demand, Baby

It’s January, and January makes me almost nostalgic for my years working the textbook counter in a used book store. I spent 17 years working for a used book company with a notable textbook business, and spent many busy Decembers and Januaries trying to match college students with the books they needed.

The textbook business was fast paced, interesting and often lucrative…as long as you understood it. Most of the buyers didn’t.

The students and their parents had lots of questions, particularly about the sales and buyback prices of the books and why they were so different. How could a book that cost $150 in August be worth $30 in December?

Supply and Demand, my friend. Even though the textbook business has changed a ton over the last 20 years, textbook values are all about supply and demand.

Publisher A publishes Basic Economics. For two years, they print and sell copies of Basic Economics as needed. Meanwhile, they work with the author on Basic Economics, second edition, which hasa few minor changes and updates. Once it comes out, they start selling the second edition and working on the third. Those first edition copies? The schools don’t use them anymore, they’ve moved on. There’s a whole lot of supply and absolutely no demand for the old edition.

Twenty years ago, that was pretty much the story. A school would adopt a book for two or three years, sell the new books, buy back the copies in reasonably good condition for half or less for a while, then move on to a new edition. Independent bookstores would try to do the same. If the department or professor switched to a new book altogether, the student might get $15-$20 on a $100 book, which would then go to another school that was still using the book.

If the edition changed, the student got a brand new door stop.

Students could pretty much sell books on campus or to an independent store, or try to find someone taking the same class at their school willing to buy the book directly.

It was a good racket. The students were a captive market that had to buy the books the professor required. They had few options to sell them, so the publishers and bookstores did very well. Of course, textbook stores had to: they had to make enough money to float all of their operations in what basically amounted to three weeks a year of sales.

So everyone got greedy. Textbook prices went up, and edition changes seemed to happen more often.

And then Ebay and Amazon Happened.

Ebay and Amazon Change the Game

Things became a lot better for the students once Ebay and seller accounts on Amazon became mainstream. Students no longer had to find buyers for their old books by networking and posting flyers. They weren’t limited to looking for the best deals on their college campus and could search on a national market. Students might even be able to get access to much cheaper international editions of the same text book.

It got easy to buy and sell used textbooks. Anyone could set up a seller account and get a much better buy back. Oh, the buyer had to beware. No one wanted to be stuck with an old edition or missing pages. Still, searching for used books to buy and selling books became a lot easier.

And students weren’t the only ones changing the game. Companies like Chegg looked at the costs and started national book rental programs. Instead of paying full cost up front and trying to get a decent buyback, a student could pay much less to borrow a book for a semester.

That doesn’t even include illegal downloads, copies, and other ways that students try to escape the traditional textbook business model.

What was a publisher to do to protect their textbook business?

Maybe the publisher just keeps raising their prices. After all, for a used market to exist, someone has to buy new stuff. If the publisher can make more on the initial sale, they still come out ahead.

Maybe the publisher adds an access code for the buyer to access online content. Of course, that code’s only good for one user. Without a valid code, the student may have to pay a bunch of money to access the site. Maybe the professor doesn’t require the online content, but maybe they do. The student may resell the book, but the publisher can still sell the access codes to each and every student who needs it.

Maybe the publisher produces custom editions, removing chapters that the professor finds unnecessary or adding some extra content. The custom edition might cost less, but it’s only used at one school, cutting way back on the student’s ability to resale outside their own school.

Maybe the publisher produces E-Books instead of physical books. No used book concerns there, though students continue to prefer physical textbooks.

The school bookstore? They keep plugging along, struggling a little more.

And the independent store? Maybe they go all online. Or they struggle. Or they go out of business.

The new textbook business model has a lot more players, and the students are more active participants than they used to be. Being active, however, doesn’t always mean the student spends less.

Supply and Demand, Baby

So what does the state of the textbook business mean for you?

It means your book prices depend on a number of factors. Understand these factors, and you can understand how to best address your textbook costs.

How long has the book been out? New books mean fewer opportunities to pick up used books (more expensive) and often more value at sellback (less supply). Older books are easier to pick up used, but also more common and may go out of edition by the end of your semester. (Suggestion, don’t pay new prices for books with copyright dates two years old or more if you can possibly help it.)

How many schools/professors use the book? The more widely used a book, the more demand. Of course, there may also be a pretty big supply after a while. On the other hand, that custom edition that’s only good at your school? You probably have to sell it at your school.

How reusable is the book? Workbooks and lab manuals are meant to be filled out. Once you fill them out, they don’t have much reuse. Books with access codes for online content may not be very reusable either once the code is used. These mean that the supply of these books is not very high, but the demand is lower too. Only perfect copies need apply when books aren’t easily reused.Oh, and that book completely covered in pink highlighter marks or that got dropped in a puddle? Not as reusable either. A book you need for two or three semesters, though, is very reusable and probably has a smaller supply of used copies. (If you need a book for more than one semester, rental is probably a bad choice.)

What Can You Do to Reduce Textbook Costs

If you’re a college student or the parent of one, there are some ways to cut your textbook costs.

The most easily followed advice is that you need to look widely at ways to buy and sell books. Don’t just go to the campus bookstore. Sure, you can look to get base prices and to get the ISBN of the book to start your search. You still want to comparison shop, even if you have a short window of time. Even most Amazon sellers can get you books within a couple of days.

If you’re selling, be clear about what you are selling. Returns and refunds can be a hassle, so make sure you are listing the book you have and not something else. Remember, there may be multiple books with the same title, and multiple editions of the same book. Keep your descriptions accurate, and don’t try to sell things that are clearly unusable like workbooks missing several pages.

Know what you need. If you can get the syllabus early, you can start looking early, but you don’t always need every book on the syllabus. Earlier searches can mean better deals, but if you don’t use a book it’s no bargain. Talk to people who’ve taken the class before to see if they used the books assigned. Talk to your professor to see if an older edition of the same book is acceptable for use (sometimes they don’t even know the edition changed.)

Finally, when you’re shopping used books online, note the reviews of the seller and check their descriptions carefully to make sure that the book is the edition you need and the book condition you want. Use the ISBN to search, rather than the title, at least initially. Don’t just pick the cheapest book available, as you might end up with something you can’t use. Buying the wrong book can cost you time and money, even if you get a refund. Shipping a heavy textbook can get expensive.

You can end up putting a lot of money into the textbook business, and it can be frustrating if you don’t understand what’s driving prices. Heck, it can be frustrating even if you do. However, understanding the factors that drive textbook pricing helps you make better decisions in your search for academic resources.

Don’t forget that Chegg and at least one other merchant are on cash back programs! But you’re right it’s a racket. When I was at UW, we were a captive audience mostly. But five years later when I went to some accounting classes, I bought cheaper editions through Amazon. I’d even get international editions sometimes. Though sometimes there’d be a different question every three or so chapters.Abigail @ipickuppennies recently posted…How we found $766 in our budget

Good advice. I don’t have much experience with Chegg, except as a competitor, but it would make sense that they would need books. And they have a decent model, as they are probably renting their books 4-5 times on average.